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What GAO Found

The Navy has experienced significant quality problems with several ship classes over the past several years. It has focused on reducing the number of serious deficiencies at the time of delivery, and GAO's analysis shows that the number of deficiencies--particularly "starred" deficiencies designated as the most serious for operational or safety reasons--has generally dropped. Nonetheless, the Navy continues to accept ships with large numbers of open deficiencies. Accepting ships with large numbers of uncorrected deficiencies is a standard practice and GAO found that there are varying interpretations of Navy policy with regard to when the defects should be resolved. In 2009, the Navy organization that oversees ship construction launched the Back to Basics initiative to improve Navy oversight of ship construction. However, a key output of the initiative promoting consistent and adequate quality requirements in Navy contracts has yet to be implemented.

Although the environment in which leading commercial ship buyers and builders operate differs in many ways from the Navy's, some commercial practices aimed at helping to ensure that ships are delivered with a minimum number of deficiencies may be informative for the Navy. Throughout the course of commercial shipbuilding projects, significant numbers of quality defects and instances of non-conforming work are identified. However, leading commercial ship buyers and shipbuilders make great efforts to ensure that these issues are resolved prior to delivery. Further, commercial ship buyers establish clear lines of accountability and hold their personnel responsible for ensuring the shipbuilder delivers a quality vessel. While commercial ship buyers focus on regularly witnessing in-process work through roaming patrols and impromptu inspections, Navy processes at the shipyards place less emphasis on in-process work. Moreover, leading commercial shipbuilders have strong quality management processes that track quality problems to the worker or supervisor level. Navy shipbuilding contractors have historically experienced difficulties in holding production workers and supervisors accountable for their work, but some of the shipyards reported they are making progress on increasing worker accountability.

Why GAO Did This Study

The Navy expects to spend about $15 billion per year to provide its fleet with the most advanced ships to support national defense and military strategies. Problems with recently delivered ships have focused attention on quality issues.

House Report No. 112-110, accompanying the Department of Defense Appropriations Bill, 2012, mandated that GAO review the Navy's quality assurance processes for new ship construction. This report discusses, among other issues, (1) quality problems in constructing recently delivered ships and Navy actions to improve quality and (2) key practices employed by leading commercial ship buyers and shipbuilders to ensure quality and how these compared with Navy practices.

GAO analyzed Navy data on ship quality from 2006 to May 2013 and spoke with Navy officials and shipbuilders. GAO also reviewed deficiency data for commercial ships and spoke with buyers and builders.

What GAO Recommends

To improve the construction quality of ships delivered to the Navy, GAO is recommending, among other things, that the Navy clarify policy on when deficiencies should be addressed, provide guidance on contract quality requirements, and assess applicability of certain commercial practices to Navy shipbuilding. DOD agreed with two recommendations and partially agreed with three, stating for example that current policy is adequate but that the Navy would monitor deficiency trends. GAO believes that the recommendations remain valid as discussed in the report.

For more information, contact Michele Mackin at (202) 512-4841 or mackinm@gao.gov.

Recommendations for Executive Action

Status: Closed - Implemented

Comments: The Navy concurred with our recommendation and was formulating plans to reorganize the SUPSHIP Management Group. The Navy determined later that they did not believe a reorganization was necessary. Instead, the SUPSHIP Management Group's quality team has implemented several measures to support and provide a direct link to the SUPSHIP quality assurance departments. The SUPSHIP Management Group now holds annual meetings with regional SUPSHIP quality assurance directors to discuss quality assurance issues, best practices, and revisions to quality assurance guidance. In addition, the most recent version of the SUPSHIP Operations Manual now provides clear guidance for monthly quality assurance metrics reporting to NAVSEA, and has reduced the quality assurance audit periodicity to two years. We believe that these changes meet the intent of our recommendation.

Recommendation: To improve the construction quality of ships delivered to the Navy, the Secretary of the Defense should direct the Secretary of the Navy to ensure that, when established, the Naval Sea Systems Command (NAVSEA)-level quality team provides support and a direct link to directors of Naval Sea Systems Command Supervisor of Shipbuilding, Conversion and Repair (SUPSHIP) quality assurance departments and is tasked with raising concerns within NAVSEA about issues affecting or potentially affecting quality throughout the acquisition process.

Agency Affected: Department of Defense

Status: Open

Comments: Navy Instruction 4700.8J was revised and reissued as Navy Instruction 4700.8K in October 2014. Officials in the Chief of Naval Operations' office told us that they believe the Navy can fulfill the intent of the revised instruction by documenting and adjudicating contractor-responsible deficiencies at the time of delivery. We have ongoing work that is providing us with additional insight into Navy Instruction 4700.8K. We expect to have additional insight next year.

Recommendation: To improve the construction quality of ships delivered to the Navy, the Secretary of the Defense should direct the Secretary of the Navy to carify Navy policy (Navy Instruction 4700.8J) by clearly identifying at what point(s) during the acquisition process contractor-responsible deficiencies are to be fully corrected and ensure the policy is followed.

Agency Affected: Department of Defense

Status: Open

Comments: Navy officials reported in June 2016 that the guidance for quality assurance requirements in shipbuilding contracts has not been revised or updated since we made this recommendation. Until the Navy provides guidance on the extent to which the Quality Performance Standard should be incorporated into contracts, this recommendation will remain open.

Recommendation: To improve the construction quality of ships delivered to the Navy, the Secretary of the Defense should direct the Secretary of the Navy to provide additional guidance on the quality requirements in shipbuilding contracts, including the extent to which the SUPSHIP Management Group's Quality Performance Standard for Construction of Naval Vessels should be incorporated.

Agency Affected: Department of Defense

Status: Open

Comments: In 2015, DOD reported that the Undersecretary of Defense for Acquisition, Technology, and Logistics had determined that the existing guidance for the use of withholds and retentions was sufficient. We currently have ongoing work that is providing us with additional insight into the Navy's process for using withholds and retentions, and plan on reporting on this issue next year.

Recommendation: To improve the construction quality of ships delivered to the Navy, the Secretary of the Defense should direct the Secretary of the Navy to provide additional guidance on use of payment withholds and retentions as a means to incentivize the shipbuilding contractor to promptly correct significant or persistent deficiencies and to deliver a defect-free, or nearly defect free ship, to the Navy.

Agency Affected: Department of Defense

Status: Open

Comments: The SUPSHIP Operations Manual requires the SUPSHIPs to document procedures for in-process inspections - but not for use of design drawings - in the quality assurance plans for each contract. However, the Navy has not said whether they have conducted, or plan to conduct, an assessment of the use of design drawings and increased focus on random and in-process inspections across all SUPSHIP locations. Until the Navy conducts an assessment of standardizing these quality assurance practices, this recommendation will remain open.

Recommendation: To improve the construction quality of ships delivered to the Navy, the Secretary of the Defense should direct the Secretary of the Navy to assess the benefits and determine whether the following practices, in effect at some SUPSHIP locations, would be useful in detecting quality problems across all locations: (1) use of design drawings during SUPSHIP quality inspections, and (2) increased focus on random and in-process inspections compared to use of resources for other types of inspections and observations.